Loading judgment…
Facts
The assessee appealed against the disallowance of Rs. 20,83,649 under Section 14A of the Income Tax Act, which was confirmed by the Ld. CIT(A). The assessee's primary argument was that no exempt income was earned during the assessment year.
Held
The Tribunal held that if no exempt income is earned by the assessee, no disallowance under Section 14A can be made. Following the decision of the Hon'ble Delhi High Court in Sahara India Financial Corporation Ltd., the disallowance made by the AO and sustained by the CIT(A) was deleted.
Key Issues
Whether disallowance under Section 14A of the Income Tax Act is permissible when the assessee has not earned any exempt income during the assessment year.
Sections Cited
14A, 8D
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
This appeal by the assessee is directed against order dated 25.11.2024 passed by the Ld. Commissioner of Income-tax (Appeals) [in short ‘the Ld. CIT(A)’] for assessment year 2017-18, (Appeals) [in short ‘the Ld. CIT(A)’] for assessment year 201 (Appeals) [in short ‘the Ld. CIT(A)’] for assessment year 201 raising following grounds: raising following grounds:
1. “The Ld Faceless CIT(A) has The Ld Faceless CIT(A) has erred in law and on the facts of the erred in law and on the facts of the case in confirming the Daction of Assessing Officer in disallowing case in confirming the Daction of Assessing Officer in disallowing case in confirming the Daction of Assessing Officer in disallowing Rs. 20.83,649 under section 14A of the Income Tax Act. The action Rs. 20.83,649 under section 14A of the Income Tax Act. The action Rs. 20.83,649 under section 14A of the Income Tax Act. The action in unjustified and unwarranted. in unjustified and unwarranted.
Your Petitioners carve leave to add, amend, alter and/ Your Petitioners carve leave to add, amend, alter and/ Your Petitioners carve leave to add, amend, alter and/or withdraw all or any of aforesaid grounds of appeal
.” all or any of aforesaid grounds of appeal.
2. We have heard rival submission We have heard rival submission of the parties and perused the and perused the relevant record. In the ground n the ground raised, sole issue is disallowance of s disallowance of Rs. 20,83,649/- mad made by assessing officer invoking e by assessing officer invoking u/s 14A of the Income-tax Act, 1961 tax Act, 1961 [In short ‘the Act’] r.w.r. 8D of the Income of the Income-tax Rule 1962 [In short ‘the Rules’] [In short ‘the Rules’]. This disallowances made by the disallowances made by the assessing officer has been has been sustained by ld. CIT(A). Before us, Ld. by ld. CIT(A). Before us, Ld. counsel for the assessee submit counsel for the assessee submitted that no exempted income was no exempted income was earned during the year under consideration. Ld. counsel referred to earned during the year under consideration. Ld. counsel referred to earned during the year under consideration. Ld. counsel referred to the para 3 of the assessment order as well as copy of the the para 3 of the assessment order as well as copy of the the para 3 of the assessment order as well as copy of the computation of the income income file to support that no exempted income file to support that no exempted income was earned during the year under consid was earned during the year under consideration. Ld. D eration. Ld. DR also did not dispute this fact. Ld. counsel further reled s fact. Ld. counsel further reled on the decision of the on the decision of the coordinate bench of the Tribunal in the case of coordinate bench of the Tribunal in the case of Welspun Steel Ltd. elspun Steel Ltd. reported in (2024) 167 taxmann.com 720 ( Mumbai (2024) 167 taxmann.com 720 ( Mumbai-Trib) and also (2024) 167 taxmann.com 720 ( Mumbai relied on the decision of th on the decision of the Hon’ble Delhi High Court in case of Hon’ble Delhi High Court in case of Sahara India Financial Corporation Ltd. Sahara India Financial Corporation Ltd. reported in reported in (2024) 168 taxmann.com 165 (Delhi), w taxmann.com 165 (Delhi), wherein it is held that no disallowances herein it is held that no disallowances will be made if no exempt income is earned will be made if no exempt income is earned by the assessee by the assessee during the year under consider the year under consideration.
3. Undisputedly, no exempt no exempted income has been earned by the income has been earned by the assessee in the year assessee in the year under consideration, therefore, therefore, respectively following the decision of the Hon’ble following the decision of the Hon’ble Delhi High Court Delhi High Court in case of Sahara India Financial Corporation Ltd. Sahara India Financial Corporation Ltd. (supra), the he disallowance made by the AO and sustain made by the AO and sustained by the ld. CIT (A) is ld. CIT (A) is deleted. The ground of the appeal of the assessee is accordingly allowed. of the appeal of the assessee is accordingly allowed. of the appeal of the assessee is accordingly allowed.
In the result, appeal of the assessee is allowed. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on nced in the open Court on 18/03 /03/2025.